Transfer of Land Act - Extension of caveat - Land charged under building contract - Dispute as to variations - Arguable case - Operation of caveat extended pending resolution of dispute in District Court - Liberty to apply

Transfer of Land Act 1893, s 137, s 138B

Deputy Commissioner of Taxation v Corwest Management Pty Ltd & Anor [1978] WAR 129

1 HASLUCK J: The plaintiff, Goldfields Homes Pty Ltd, has lodged caveat H354849 over a property situate at 126 Piesse Street, Boulder in the State of Western Australia. The subject property is more fully described as lot 2 on survey strata plan 36728, being the whole of the land comprised in certificate of title volume 2170 folio 74 ("the Land"). In the manner allowed by s 138B of the Transfer of Land Act 1893 the first defendant, Anita Jones, as the proprietor of the land affected by the caveat, issued a notice to the effect that unless the caveator obtained from the Supreme Court an order extending the operation of the caveat for a period beyond the 21 days allowed by the statutory provision the caveat would lapse. The plaintiff has now applied to the court by originating summons for an order extending the operation of the caveat until judgment in the District Court action number 912 of 2000 is delivered or until further order. I understand that the second defendant, the Registrar of Titles, is willing to abide the outcome of the court's ruling.

2 In support of its application for relief, the plaintiff relies upon the affidavit of Nigel Byrd, sworn 11 April 2000, and a further affidavit of Mr Byrd sworn 9 May 2000. The first defendant relies upon her own affidavit, sworn 26 April 2000, and the affidavit of her husband, Russell Jones, sworn 26 April 2000. The parties have also filed and served written submissions in support of their respective positions.

3 These affidavits reveal that the plaintiff is a builder and that at all material times Mr Byrd was the managing director of the company. Mr Jones was employed by the plaintiff as a quantity surveyor/assistant manager. It seems that in or about November 1998 Mr Jones and the first defendant decided to construct three townhouses on the land. They were aware that a man named Wes Blackie, who also worked for the plaintiff, had prepared plans for a development on a block similar in size to the subject land. According to Mr Jones, some variations to the Blackie plans were costed and a final contract price of $215,460 was agreed upon which encompassed variations to the basic plans.

4 The first defendant and her husband borrowed money from the ANZ Bank in order to finance the development. It was common ground at the hearing before me that the plaintiff and the first defendant then entered into a standard form lump sum contract for medium works with the description of the works in question being given as brick veneer townhouses per quotation dated 14 January 1999. I note in passing that the relevant quotation envisages the construction of townhouses "as per our supplied plan and specifications". The relevant details were set out on an attached list, except for certain "requested variations" embracing items such as fencing and gates and garden shed with concrete floor. I note in passing that the list of requested variations contains no reference to carports. The written contract was executed by the parties on 15 January 1999, with the construction period being given as a period of 20 weeks from the date of commencement. I note in passing that the first defendant signed the contract in her capacity as owner of the land.

5 Clause 16 of the contract provides that the contract may be varied at the request of the owner by omissions from the works or by the performance of extra work with the consent of the builder, which consent shall not be unreasonably withheld. The builder may decline to execute any variation required by the owner unless the owner has first given notice in writing detailing the requirements. If the builder agrees to undertake the variation, the variation shall be in writing and signed by both the builder and the owner. The value of all extra work shall be added to the contract sum and shall be added to the next progress payment due after the execution of such work. The builder shall not be entitled to payment for any variations which are due to his own default.

6 Clause 33(a) concerning "security" is important for present purposes. That provision reads as follows:

"The owner hereby charges the parcel of land on which or on part of which the works are to be erected with due payment to the builder of all moneys that may become payable to the builder by virtue of this contract or otherwise from the carrying out of the works."

7 According to Mr Byrd, Mr Jones, in his capacity as quantity surveyor/assistant manager of the plaintiff company, costed out the works for the plaintiff and authorised all material and subcontract orders for the works. Mr Byrd went on to say that: "Jones was also the prime agent for the first defendant and was at all material times her agent for the purposes of the work."

8 It emerges from the affidavits filed on behalf of the first defendant that the building works proceeded. A total sum of $216,489.50 was paid on the first defendant's behalf by the ANZ Bank, from which she and her husband had borrowed money, with the last payment being made on 26 August 1999. The first defendant said that this figure represented an overpayment of $1,029.50, although she was unable to provide any explanation as to how that occurred. She said further that upon receipt of the last payment the plaintiff handed over the keys to the works. As far as she was concerned, there was nothing left to do under the contract. The respective obligations of the parties had been completed. Mr Jones contended in his affidavit that, at about this time, prior to his going on holidays, Mr Byrd had been asking him about cost overruns on the contract, saying that they needed to be treated as variations. According to Mr Jones, he then signed "under pressure" a variation order in blank.

9 Mr Byrd said that in the first week of September 1999, while Mr Jones was on leave, he examined the relevant order file for the works and discovered for the first time that Mr Jones had been responsible for various discrepancies in relation to the costing, variations and orders for the work. Accordingly, when Mr Jones returned to work, Mr Byrd confronted him with what had been discovered and presented him with a letter dated 6 September 1999, detailing the complaints and a variation order of the same date, to be signed by Mr Jones. The letter alleges, inter alia, that Mr Jones was responsible for under-costing of the base model for the townhouses by nearly $10,000 and for failure to issue variations and for misrepresenting the effect of variations made. The variation order contained a list of 12 items, which were to be treated as variations. Sizeable items on the list included such matters as the difference between the original quote and the quote after wrong costing (the difference being given as $10,830), raising the level of the whole rear block by 200mm from quoted and signed plan (given as $6,900) and the adding of carports per plan, but not quoted and not reported to management (given as $12,240).

10 Mr Jones signed the letter and, in doing so, could arguably be said to have agreed that the items complained of were to be treated as variations. It is important to note, however, that his signature is accompanied by an endorsement in these terms: "Signature only to agree with list of job duties. Not in agreeance with items 1-8". In other words, on his version of events, he did not agree the eight specific matters of complaint concerning alleged under-costings and variations referred to in the letter. His signature also appears on the variation form opposite the inscription "Signed (owner or agent)". On this document his signature is not accompanied by any reservation of his position. Thus, on the face of the variation order, Mr Jones had purported to authorise the plaintiff as builder to make the variations detailed on the variation order to a total value of $37,940.

11 According to Mr Byrd, these documents were necessary in that had the items on the list, which were to be treated as variations, been properly effected, the sum of $37,940 would have been due to the plaintiff. He went on to say that in costing the works, Mr Jones had ignored the variations and had failed to reflect them in accounts related to the works. To the extent that Mr Jones had acted in that manner, the first defendant, as owner of the property, had acquired a benefit by the property being enhanced to the value of the variations. Mr Byrd said further that, at the time Mr Jones signed the variation order, it was agreed that the sum of $37,940 due in terms of the variation order would be paid upon settlement of the sale of the first of the three units comprising the works.

12 I pause to note that the first defendant and Mr Jones dispute the sequence of events just referred to and the effect of the documentation. Mr Jones denied that he signed the variation order upon returning from leave and suggested that the variation order bearing his signature was the one he had signed in blank before going on leave. He challenged the notion that Mr Byrd had found out about discrepancies while he was on leave and said that Mr Byrd was kept informed throughout the progress of the works and "in any event so far as I am concerned there were no discrepancies that I was aware of other than for the three carports." He denied any misconduct on his part and said that he only signed the letter after qualifying what his signature meant. According to him, there was no discussion on that occasion concerning variations and there was no variation order attached to or accompanying the letter.

13 Mr Byrd said that, on 17 December 1999, Mr Jones' employment with the plaintiff company was terminated. The following day, Mr Jones left a handwritten message on Mr Byrd's desk to the effect that he had discussed the matter with the first defendant and that the variations in question would be paid on settlement of the final unit. The handwritten note reads as follows:

"Nigel - have discussed with Anita. Will pay variations on settlement of final unit. Can you give me termination pay today. Preferable before 12 o'clock. Call me at home. Thank you. RJ."

14 Mr Byrd went on to say that this unilateral change by Mr Jones of the agreement to pay the variations upon settlement of the final unit motivated him to protect the plaintiff's interests by instructing solicitors in Kalgoorlie to register a caveat over one of the units, namely, unit 2, this being the caveat the subject of these proceedings. When the plaintiff received a letter of the kind contemplated by s 138B of the Transfer of Land Act, requiring the plaintiff to obtain an extending order, the plaintiff not only took steps to apply for relief under the Transfer of Land Act, but also issued a District Court writ of summons against both the first defendant and Mr Jones in regard to the sum of $37,940. In those proceedings, Mr Jones is described as the first defendant and his wife, Anita Jones (the first defendant in these proceedings) is described as the second defendant. The indorsement of claim is in these terms:

"1. against the defendants for payment of the amount of $60,811.01 being the total amount due by the defendants to the plaintiff in respect of monies loaned by the plaintiff to the defendants during 1998/9;

2. against the second defendant for payment of the amount of $37,940.00 being the amount due by way of variations to a lump sum contract made between the plaintiff and the second defendant during January 1999, alternatively against the first defendant for deceit for concealing the variations from the plaintiff at the time they were made;

3. interest at the rate of 6% per annum pursuant to section 32 of the Supreme Court Act, alternatively at the rate of 20% per annum in terms of the lump sum contract;

15 I digress briefly to note that the claim in the District Court clearly embraces matters other than the question of whether the sum of $37,940 is payable to the plaintiff by Mrs Jones. It is also important to note that the claim does not bring into issue the question of whether the plaintiff is entitled to charge the subject land. When the originating summons was brought on for hearing before me, I was told that a statement of claim has not yet been filed and served in the District Court proceedings. I was led to believe that, partly as a consequence of discussion before me, it seemed likely that the statement of claim would include reference to the issue just mentioned, and seek declaratory relief as to whether the plaintiff was entitled to charge the land. This would be done upon the basis that s 55 of the District Court Act 1969 confers upon the District Court, as regards any action or matter within its jurisdiction for the time being, power to grant such relief or make any order at law or in equity in a full and ample manner as might and ought to be done in the like case by the Supreme Court.

16 For present purposes, I proceed from the premise that declaratory relief of the kind just mentioned could be made if the matter was pleaded in an appropriate manner, and relief sought of the kind just mentioned. The District Court proceedings would certainly provide each party with an opportunity to be heard as to the various matters in controversy and for the court to make a full inquiry into the disputed issues and to hand down a decisive ruling in regard to the same.

17 When the originating summons was brought on for hearing before me, it became apparent that in registering the caveat the plaintiff relied on cl 33 of the building contract. It was the plaintiff's case that the first defendant's husband, in costing the works, failed to charge for variations and made allowances for unauthorised credits in respect of fencing and stormwater piping in a total amount of $37,940. The first defendant, as the owner of the property, was said to have derived the benefit of these variations and allowances and was indebted to the plaintiff in the sum of $37,940, with the result that the plaintiff was at liberty to charge the land. Counsel for the plaintiff recognised that there were various factual matters in controversy between the parties, but submitted that there was a serious question to be tried as to whether a valid caveatable interest existed, with the result that the operation of the caveat should be extended until the matters in issue had been disposed of by the handing down of a judgment in the District Court proceedings.

18 Counsel for the first defendant emphasised that the only basis for charging the land was the signed variation order and/or arrangements concerning the sum of $37,940. The documentation and the arrangements relied upon could not be regarded as sufficient because the contract had been discharged by performance, with the result that, after handing over of the development in August 1999, there were no further obligations between the parties. Documents signed or arrangements made after that date were not enforceable. Further, and in any event, upon close analysis of the relevant documents and events, it emerged that all the items the subject of the so-called variation order should properly be characterised as work forming part of the works the subject of the completed contract.

19 Counsel for the first defendant contended also that the variation order, or any arrangement to similar effect, was unenforceable because the first defendant herself was not a party to any such documentation or arrangements. Her husband was not authorised to act as agent on her behalf. Variations under the contract had to be in writing, signed by both the plaintiff and the first defendant, and there was no signed variation order in existence fitting that description. The fact that Mr Jones was and is the husband of the first defendant did not make him the wife's agent for the purposes of the contract.

20 In Eng Mee Yong v Letchumanan [1980] AC 331, the Privy Council said at 335:

"The caveat under the Torrens system has often been likened to a statutory injunction of an interlocutory nature restraining the caveatee from dealing with the land pending the determination by the court of the caveator's claim to title of the land, in an ordinary action brought by the caveator against the caveatee for that purpose. Their Lordships accept this as an apt analogy with its corollary that caveats are available, in appropriate cases, for the interim protection of rights to title to or registrable interest in land that are alleged by the caveator but not yet proved."

21 Various decisions of this Court are also useful points of reference in regard to an originating summons of the kind before me. In Porter v McDonald & Anor [1984] WAR 271, a contract between the parties for the purchase and sale of shares contained a provision whereby the appellants, as purchaser, charged any interest which they, or any of them, had from time to time in any real property in the State with the payment of the price for the shares. When the parties to the contract became involved in litigation, the respondents, pursuant to the equitable charge in the contract, lodged a caveat against land owned by the appellants and which they were on the point of selling. The appellants owned other land exceeding the amount outstanding under the contract. They sought to have the caveat removed, contending that, because it was lodged for an ulterior purpose (to bring pressure on the appellants) and because the damages claimed by them in the other action would extinguish the debt, and because there was sufficient other land the subject of the equitable charge which could be caveated, the court should, in the exercise of its discretion, order the removal of the caveat. The Full Court held that, when it was not in dispute that the caveator had a valid contractual right to the interest sought to be protected by the caveat, matters such as the sufficiency of other security, the motives of the caveator and the balance of convenience are irrelevant and would not furnish grounds to order the removal of the caveat.

22 In the course of his judgment, Rowland J observed that the practice with respect to removal of caveats is of longstanding. The caveat will not be removed unless the claim to the interest appears to be without foundation, and the courts will not, except in the most exceptional case, decide that matter on summons on affidavit evidence.

23 In Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42, the Full Court in this State applied the principles in Eng Mee Yong v Letchumanan (supra) and held that the onus lies on a caveator in proceedings for continuance of the caveat under the Transfer of Land Act to demonstrate that there is a serious question to be tried on whether a valid caveatable interest exists. It is apparent from the judgments that, although the balance of convenience is a factor to be considered, interlocutory removal of a caveat where an arguable case as to the existence of a caveatable interest has been demonstrated will be unusual.

24 Against this background, I now turn to the circumstances of the present case. Clause 33 of the building contract provides an avenue whereby the plaintiff was at liberty to charge the land on which the works were to be erected, with due payment of all moneys that may become payable to the builder by virtue of the contract "or otherwise from the carrying on of the works." The contract allows for variations to be made at the request of the owner. The relevant clause of the contract contemplates that variations will be in writing. In the present case, the plaintiff points to what purports to be a signed variation order of the kind allowed for by the contract, namely, the variation order dated 6 September 1999 listing 12 items, amounting to $37,940 in value, which purports to be signed by the owner or her agent. Liability for the amount in question was denied by the first defendant. It was common ground at the hearing that the amount in question had not been paid.

25 It follows from earlier discussion that if the signed variation order was of a kind complying with the terms of the contract, then this would become a basis for enforcing the charge allowed for by cl 33 and, ultimately, a sufficient basis for lodgement of the caveat. Section 137 of the Transfer of Land Act makes it clear that the caveator must be able to point to an estate or interest in the land. Porter v McDonald (supra) supports a finding that where a party by a written contract has charged his land with payment of a debt, then such a charge will give rise to a caveatable interest. In this case, however, the parties are in dispute as to whether the signed variation order relied upon by the plaintiff complies with the provisions of the contract.

26 To my mind, a variation order under a building contract is not of the same order as a note or memorandum evidencing a contract for the sale of land which must be signed by the party to be charged, or by his agent duly authorised in writing. There is an arguable case as a matter of law that a variation order in the circumstances of the present case will be binding if it is signed by the owner or by his agent, provided the agent is authorised to commit the owner to the works the subject of the variation order. In this context, the authorisation of the agent need not necessarily be in writing.

27 The parties in the present case are in dispute as to whether Mr Jones was authorised to sign any such document on behalf of his wife, the first defendant. There is, however, evidence before me that he was authorised to act as her agent. Mr Byrd deposes to the fact that Mr Jones was the agent for the first defendant at all material times for the purposes of the works and this has not been denied by any answering affidavit. It appears from the affidavits relied on by the first defendant that she and her husband were both actively and jointly engaged in completing the works and that she "in conjunction with my husband" had borrowed money from the ANZ Bank. Further, putting to one side the discrete controversy as to whether the variation order contained a list of items at the time it was signed, some weight has to be given to the fact that Mr Jones was prepared to sign the document on the basis that he was the owner's agent and to sign the accompanying letter dated 6 September 1999, which was clearly referable to the project.

28 Finally, and importantly, he was the author of a handwritten note to Mr Byrd at the time his employment ended to the effect that he had discussed the situation with his wife and was prepared to say that, as a consequence of that discussion, they would "pay variations on settlement of final unit." When these matters are considered in combination, they strongly suggest that Mr Jones was, indeed, authorised to act as an agent on his wife's behalf. It is not for me, in these proceedings, upon the basis of affidavit evidence only, to make a final determination about this aspect of the matter, but I am satisfied that the plaintiff has advanced an arguable case in regard to this issue.

29 There is then a further issue as to whether a variation order should be disregarded, having regard to the contention of Mr Jones that the relevant document was blank at the time he signed it. Again, the resolution of this issue may ultimately depend upon the credibility of the various witnesses. For the moment, having regard to the materials before me, I am persuaded that an arguable case has been advanced by the plaintiff in regard to this issue also. Mr Byrd, in his affidavit of 11 April 2000, provides clear and concise evidence as to the sequence of events leading up to the signing of the disputed variation order and his account is generally consistent with the surrounding circumstances. Mr Jones does not dispute that he received Mr Byrd's letter dated 6 September 1999 upon his return from leave and that letter, in its terms, foreshadows that Mr Jones will be required to sign for variations the subject of the alleged irregularities. Again, Mr Jones' subsequent handwritten note clearly presumes that an amount in respect of variations is due and owing and this, too, is consistent with the notion that particulars of the amount in question had been fixed by agreement in early September 1999. I am, therefore, satisfied that there is an arguable case as to this point also.

30 When one turns to the question of whether the items the subject of the signed variation order should be characterised as variations or simply as part of the works the subject of the contract, different considerations arise. As to this issue, it is apparent that the court required to rule upon the matters in controversy will be obliged to undertake a careful and thorough examination of the relevant plans and specifications. The full range of the relevant materials is not presently before me. Nonetheless, Mr Jones' handwritten note is again a significant piece of evidence that some amount was thought to be due in respect of variations. Further, it appears from his own affidavit, and from a comparison between the terms of the variation order and the description of the works the subject of the contract contained in other documents presently before me, that the carports, being an alleged variation to the value of $12,240, were not included in the contract works. The same process of comparison also suggests that another significant item, namely, the raising of the level of the block to the value of $6,900, was also not encompassed by the contract works.

31 For these reasons, I consider that, as to this aspect of the matter, the plaintiff has advanced an arguable case that variations of a kind sufficient to support a charge under cl 33 were due and payable. I arrive at a similar conclusion in regard to the question of whether the contractual obligations of the parties had been discharged by performance after the handing over of the works in August 1999. Mr Jones' handwritten note is evidence to the contrary, that is to say, it suggests that he and his wife accepted as at December 1999 that they had obligations under the contract in respect of variations. Further, it is generally recognised in the law of contract, that various secondary obligations, especially as to default or as to the enforcement of incidental conditions, can survive settlement of a transaction or the performance due under a contract. Accordingly, it is not fatal to the plaintiff's claim that the company is relying upon a document created or an arrangement made in early September 1999 subsequent to delivery of the completed works to the owner.

32 If I be wrong in the observations I have made to this point, then further, and in any event, the ruling of the High Court in Pavey & Mathews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 is a persuasive authority in support of the plaintiff's case. The court held that where a party has supplied material or provided some benefit to another under a building contract, albeit not a building contract in the prescribed written form, in anticipation of the performance of the contract, the retention of the benefits conferred without having paid for them is prima facie an unjust enrichment. The law of restitution provides a remedy if the law of contract cannot assist, to allow recovery of a debt imposed by law. Such a debt would fall within the language of cl 33 in the present case, which allows for a charge against the subject land to be enforced in respect of moneys payable to the builder by virtue of the contract or otherwise from the carrying out of the works.

33 I hold, therefore, that there is an arguable case in favour of the plaintiff's entitlement to enforce its claim and that the District Court is the appropriate forum to resolve the matters in controversy. The order usually made is that the operation of the caveat will be extended, provided an action is commenced which will have the effect of resolving the various disputed issues and determining whether the claim to an interest in the subject land is valid. It is therefore necessary, as part of the orders to be made by me that provision is made for the statement of claim in the current District Court proceedings to include a prayer for declaratory relief directed to this point. I cannot rule specifically that the statement of claim be presented in that form, for control of the pleadings is a matter for the District Court. Having made these observations, however, so that the parties are aware of the basis upon which an order is being made in these proceedings for an extension of the operation of the caveat, I will also order that the first defendant be allowed liberty to apply to this Court for further orders or directions if the pleadings do not raise that issue for decision within a prescribed time from the date of these orders. I will hear from the parties as to the exact form of the orders to be made.